Establishing local solar light businesses means we can reach further faster and create a ripple effect of change throughout communities. Microfinance offers a path to start and scale a business for entrepreneurs in remote, rural communities.
Why Microfinance – Reaching Rural Areas
The traditional banking system and Microfinance Institutions (MFIs) are not set up to provide loans to entrepreneurs in rural areas. People in remote, rural areas are seen as high risk due to their location and lack of collateral, credit history and formal business registration.
When loans in these communities are available, they often come with high-interest rates, averaging around 40% per year. High-interest rates can make it difficult for small business owners to make a profit and grow their business.
Our work in the most remote areas of sub-Saharan Africa showed the need for financing solutions that worked
Penny Mupeta, a solar entrepreneur in Zambia, demonstrating solar lights to a customer. Photo: SolarAid/Jason J Mulikita.
How does it work – Affordable finance
SolarAid offers microfinancing to the entrepreneurs we work with in two main ways – consignment and our cooperative, Financing Energy Businesses Cooperative (FEBCO).
In Zambia, we have created a zero-interest credit facility. Solar entrepreneurs receive the stock they sell on consignment and pay SolarAid back when sold. The zero-interest credit facility allows the entrepreneurs to have enough stock to sustain the business and agree on a flexible payment plan, depending on how they make their returns as they continue to provide clean, safe solar light to people in their communities.
In Malawi, we created the first energy focused cooperative in the country, FEBCO. It is a membership organisation run by Solar Entrepreneurs for Solar Entrepreneurs with the most affordable interest rates in Malawi. Solar Entrepreneurs and Mayi Walas can join FEBCO as members by investing some of their own money, differing depending on the type of entrepreneur. This capital is supplemented by external financing from the supporters of Lendwithcare. It is then all pooled together for members to access as a loan to help build their businesses.
